Hotel developers ask for investment incentives

The Vietnam National Administration of Tourism (VNAT) is going to lodge a proposal to the government, asking for investment incentives for the enterprises that develop hotels and tourism accommodations.

Do Thi Hong Xoan, Chair of the Hotel Association, thinks that the current tax policy applied on tourism accommodations is unreasonable.

“A resort area covers 20 hectares, but the investor only uses 35-40 percent of the total area for the construction works. However, in this case, the investor has to pay the same high tax rate for the whole area of 20 hectares, which I believe an unreasonable taxation,” Xoan said.

She went on to say that only devoted people dare to make investment in hotels at this moment, because it is very difficult to borrow capital, while the bank loan interest rates are sky high and hotel room occupancy ratio is low.

Also according to Xoan, a lot of hotels and resorts have been build in recent years, but Vietnam still lacks high quality accommodations for tourists. Therefore, it is still necessary to encourage the investment in hotel development, especially high grade hotels, in order to well prepare to serve tourists when the number of travelers to Vietnam increases sharply.

Meanwhile, investors are now facing big difficulties due to the high land tax and high electricity and water prices.

Hotel and resort developers have voiced the same complaints that the corporate income tax and the peak hour electricity pricing mechanism applied to tourism accommodations are overly high.

Vu The Binh, Chair of the Travel Association, said that travel firms have complained about the land tax over the last many years, but there has been no change in the tax policy so far.

According to Phung Quang Thang, a senior executive of Hanoitourist, in the tourism sector, there are two business fields that need big investments, but it will take investors a long time to take back investment capital: hotel development and means of transport development. “The State should offer investment incentives to help develop the two business fields,” he said.

In fact, the investment incentives offered to tourism accommodation developers have been stipulated in the Tourism Law already. The law says that the State offers preferences in land allocation, finance and credit to institutions and individuals who make investments to develop material facilities for tourism, especially in remote areas. The law also stipulates that Vietnam allows importing of modern specialized equipment to be used at high grade tourism establishments.

However, according to Le Mai Khanh, Deputy Director of Hotel Department under VNAT, to date, only the tax incentives applied to the import of equipment for the first time have been clarified.

When asked why VNAT still has not promulgated legal documents clarifying the investment incentives stipulated in the tourism law, Vu The Binh, who was the Director of the Travel Department under VNAT, said it always takes a long time to compile and issue legal documents. Therefore, in many cases, legal documents do not have the topicality right after they come out.

VNAT’s leaders said they have proposed to put the amendment of the Tourism Law into the upcoming National Assembly’s session’s agenda. While waiting for the law amendment, in order to help ease the problems on enterprises, VNAT will ask the government to apply some preferences in tax, land allocation, electricity and water prices.

Meanwhile, the representative from the Ministry of Planning and Investment, said that the proposals for investment incentives need to come in line with the tourism law, the tourism development program up through 2020, which has been submitted for the government’s approval.

Regarding the proposal to reconsider the tax rate imposed on the resort land area where there is no construction work, he said, that clients who want to stay in the resorts, have to pay money for the whole campus, environment and the whole area, not only for the rooms. Therefore, it would be unreasonable to impose tax on the land area with construction works only.  -DTCK

Tags: Vietnam hotels, Vietnam Tourism